Aerospace & Defense

Southwest, Pilots Union at Odds Over Boeing 737 MAX

Southwest Airlines Co. (NYSE: LUV) and its pilots’ union have been negotiating a new contract since the old one expired in 2012. One of the stickier issues is the airline’s plan to incorporate the 737-800 MAX into its fleet beginning next year.

Boeing Co. (NYSE: BA) continues to say that the new plane will be available to launch customer Southwest by next May, well ahead of the earlier schedule under which the planes were to be delivered in the third quarter of 2017.

The Southwest Airlines Pilots’ Association (SWAPA) insists that unless the new plane is added to the union contract. The federal Railway Labor Act, which also applies to airlines, requires that during contract negotiations both sides maintain the status quo. The union maintains that because the new planes are not listed in the expired contract, the 737s cannot be flown until a new contract is negotiated.

The airline maintains that the new 737-800 is no different from other planes already listed in the previous contract except for their new engines. Therefore, the new planes do not need to be specifically named in a new contract.

Union pilots already have picketed the airline at Dallas’s Love Field and plan to picket the airline’s shareholder meeting in Chicago later this week. Under the federal law, unions may not strike unless the National Mediation Board rules that talks are stalemated. At that point arbitration is offered and if either side rejects an arbitrator, a 30-day cooling off period is begun. If there is still no settlement, the union may seek what is known as “self-help.” If the self-help point is reached, Southwest could initiate a lock-out of the pilots or the pilots could go on strike.

Southwest’s stock closed at $41.56 on Friday, up 0.8% for the day, and was inactive in Monday’s premarket session. The stock’s 52-week range is $31.36 to $51.34, and the consensus price target on it is $55.82.